SHARES in car insurer Admiral slammed into reverse yesterday as it warned of falling profits due to downward pressure on UK motor cover premiums.

The FTSE-100 company also surprised investors with plans to issue debt of £200million, a move it described as "an opportune time to strengthen our capital resources". Admiral said it had covered an extra 300,000 customers in the first half taking its total to 3.9 million but group turnover fell by £100million to £1billion.

Chief executive Henry Engelhardt said: "In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of a return to premium growth.

The market will be surprised that Admiral sees a need to raise debt

Peter Eliot, Berenberg analyst

"Our margin expectations for business earned this year are lower than in recent years in the main as a consequence of the decline in premiums. Much of the impact of reduced margin will be reflected in earnings of subsequent years."

Berenberg analyst Peter Eliot said: "The market will be surprised that Admiral sees a need to raise debt and we believe that the trading statement contains some negative messages." Admiral shares fell 52p to 1522p.